Selling Multifamily Portfolios to Wall Street Investors: Process, Upside, and More with Ray Heimann

Join us on this episode as we chat with Ray Heimann, a real estate investor specializing in multi-family properties in the lower middle market. We’ll discuss how his investment strategy is based on understanding the market at a block-by-block level, analyzing median income and other factors before buying and renovating properties to add value and package them into portfolios for sale to institutional investors. We’ll learn about the two components of investing: value-add through renovations and rolling up portfolios. We’ll also explore the difference between local and Wall Street investors, including what they look for in an investment and how Exit Co. bridges the gap between them.

[00:01 – 06:05] Opening Segment

• Introducing Ray to the show
• Adding value through renovations and packaging them into portfolios for institutional buyers
• Economies of scale achieved through group purchasing and using tech
• Understanding the different sub-markets by analyzing block by block and neighborhood by neighborhood
• The soft side of understanding the market involves walking it, talking to brokers, and being constantly in touch with it

[06:06 – 13:28] Understanding Wall Street’s Appetite for Real Estate Portfolios

• Spend a lot of time in the market to understand it and pick the right submarkets
• Target tenants with household incomes of 80-120K per year
• Value add through renovations and portfolio exit
• Renovations increase value from 100 to 150-170$/sqft
• Portfolio exit increases the value to 240-270$/sqft
• Exit strategies include Wall Street investors, private equity funds, multi-family offices, international investment funds

[13:29 – 19:39] Bridging the Gap Between Wall Street and Main Street Real Estate Investors

• Arbitrage between interest rates and yields is key
• Exit strategies include bundling properties into portfolios and offering exits across markets with similar themes
• Local investors don’t think about cash flow the same way as Wall Street investors
• The acquisition strategy is 60-70% off the market, reaching out to sellers directly through omnichannel methods

[19:40 – 25:59] Investing Wisely: Understanding Assets to Avoid Making Bad Investments

• Sweet Spot is a 6-8 unit apartment building, often inherited or not managed well.
• Offering deals without broker fees and can transact quickly and off-market
• Hitting higher cap rates than ever before due to recession fears
• The exit cap rate has not changed much, and we still hit our typical return

[25:30 – 31:38] Closing Segment

• Best investment: team, apprenticeship, and training them for success
• Worst investment: not understanding what was being invested in, overly complex, and getting bit in the rear end by it
• The most important lesson learned: finding out what you’re good at and what you like and doing that thing and then finding out what you’re bad at and what you don’t like and filling in the gaps with something or someone

Quotes:

“You have to understand it. You have to walk it; you have to talk to brokers. You have to be in touch with that market to get there constantly.” – Ray Heimann

Connect with Ray!

Website: www.USATerra.com

Email: [email protected]

Invest passively in multiple commercial real estate assets such as apartments, self-storage, medical facilities, hotels, and more through https://www.passivewealthstrategy.com/crowdstreet/

Track your rental property’s finances with Stessa. Go to www.escapingwallstreet.com.

Join our Passive Investor Club to access passive commercial real estate investment opportunities.

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